Consumer Price Data Predictions
Wednesday's consumer price data is anticipated to reveal a 0.2% increase in headline inflation and a 0.4% rise in core inflation for March.
Market Reactions and Federal Reserve Actions
Edward Moya, the senior market analyst at OANDA, commented on the importance of inflation data for traders. Market participants are trying to discern if a return to disinflation will complicate the Federal Reserve's decisions.
Expected Fed Rate Hikes and Cuts
The Federal Reserve is expected to raise rates by an additional 25 basis points during its May 2-3 meeting, then pause in June. Despite predictions of a year-end rate cut due to a potential recession, Fed officials maintain that high rates are necessary to reduce inflation.
Strong U.S. Jobs Data and Rate Hike Possibilities
Impressive job data for March, which included the addition of 236,000 jobs and a drop in unemployment to 3.5%, has increased expectations that the U.S. central bank will implement another rate hike.
Dollar and Euro Fluctuations
The dollar index fell 0.36% to 102.08, while the euro gained 0.52% to $1.0918. The euro's boost may be attributed to increased European bond yields on Tuesday as markets reopened following the Easter holiday.
European and U.S. Rate Differences
Simon Harvey, head of FX analysis at Monex Europe, suggested that currency trading algorithms based on the difference between European and U.S. rates might have sold euros for dollars when U.S. Treasury yields rose following the jobs data release, while European bond markets remained closed.
Catching Up After the Break
European bond yields experienced a sharp increase on Tuesday as they caught up with the market after the holiday break.
Dollar's Performance Against Yen and Bitcoin
After surging on Monday, the dollar also slipped against the yen due to Bank of Japan Governor Kazuo Ueda's indication of no urgency to reduce stimulus. The dollar dropped 0.33% against the Japanese currency, landing at 133.16. In cryptocurrency, bitcoin surpassed the significant $30,000 mark for the first time in 10 months, reaching $30,184 with a 1.8% daily increase.
